Co-op Bank needs £400m to cover cost of misconduct

GARETH MACKIE

The Co-operative Bank today said it would have to raise £400 million through a share issue in the coming months after it was hit by higher-than-expected costs associated with its separation from its parent company.

The lender, which is now just 30 per cent owned by the Co-operative Group, said the break-up had proved “more costly, more time consuming and more complex than anticipated”, and it is setting aside about £40m to cover the costs.

In addition, Co-op Bank said it is facing a £400m hit from issues such as payment protection insurance, interest rate swaps and “technical breaches” of lending rules.

Co-op Bank has shed about 1,000 jobs since it needed a bondholder bail-out to help it address a £1.5 billion black hole in its finances, and chief executive Niall Booker said the lender expects to report a loss of between £1.2bn and £1.3bn for 2013.

He added: “We have started to simplify the business, reduce costs and de-risk assets as we drive the change needed to return to our roots as a bank focused on our retail and SME customers. However, there remain significant challenges ahead.”